Over the weekend, Netflix announced it would split its business into two separate arms – a DVD rental platform called Qwikster, and a streaming video service which will retain the name Netflix.
It was a strange and surprising announcement, to say the least, compounded by an equally strange and surprising blog post from Netflix CEO Reed Hastings, who apologized profusely for having "messed up" his announcement that subscription prices would go up.
Today comes speculation that Netflix could be considering selling Qwikster at some point in the future, setting itself up as a streaming-only platform. "The separation of online streaming and DVDs will set the stage for spinning off or selling the DVD business in the future," George Askew, an analyst with Stifel Nicolaus & Co., told Bloomberg News.
Although Netflix has estimated that it still attracts approximately 14.2 million DVD subscribers, it is clear that the future of movie rental lies with streaming video. (Netflix has about 22 million streaming subscribers already.) Consider the widespread proliferation of tablets such as the iPad, or big-screen smartphones such as the Droid Bionic, which are optimized for streaming video – and which certainly don't ship with a disc drive.
Streaming video is more convenient, more easily accessible across a range of devices, and often requires less hardware. (Streaming video still lags behind DVDs in terms of video quality and rental options, but Netflix can work that part out.) It would also be cheaper for Netflix to operate – Horizons readers will remember that part of the reason for the September price hikes were high postal costs.
For now, Netflix says it is committed to offering both streaming and DVD options. But as the AP notes today, Netflix has made a "hard landing" in recent months; it may be forced to shake things up all over again. "Clearly the company is not going to grow at the rate that it has in the past few years," Michael Corty, an analyst at Morningstar, told the AP.
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